Singapore exchange plumps for bigger is better

Scott Rochfort

MORE than a year after having its proposed ''merger of equals'' with the Australian Securities Exchange shot down by federal Treasurer Wayne Swan, the Singapore Exchange has attempted to boost its credentials as a bastion of good corporate governance.

Companies will now have to have had an operational history to be allowed on to the main board of the chewing gum-free island state's main exchange, in new rules outlined by the Singapore Exchange yesterday.

Or failing that, they need to have an initial public offering market value of more than $S150 million ($A115 million) or have had a pre-tax profit of $S30 million in the past financial year.

''The enhanced admission standards will increase Singapore's attractiveness for companies and investors, further strengthening its position as an international financial centre,'' blurted SGX chief executive Magnus Bocker.

Apparently companies worth more than $S150 million are generally squeaky clean.

In a statement released by the SGX, the president of Securities Investors Association of Singapore, David Gerald, explained: ''Investors can look forward to a more attractive market that has a higher level of corporate governance overall.''

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Meanwhile, the Elmer Funke Kupper-run ASX appeared less fussy.

In an apparent bid to delight superstitious Chinese investors, the ASX was yesterday ''pleased to announce'' the listing of a loss-making iron ore explorer registered in Australia in March with a market capitalisation of slightly under $3 million.

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The ASX said in a statement that Equamineral Holdings had become the 888th listed entity to have a Perth home branch.

Swan on lookout

SWAN appears to be trawling the ASX for upbeat announcements to latch on to in a bid to dent Opposition Leader ''Tony Abbott's spurious and irresponsible scare campaign'' over the recently introduced carbon tax.

Woodside chief executive Peter Coleman yesterday said his 43 per cent lift in production for the quarter was a ''testament to the capabilities of our operations team''.

But Swan argued: ''Today's news is also a reminder that the surge in resource investment is delivering a substantial boost to Australia's export capacity - and we'll continue to see the benefits of this for years to come.

''While global headwinds and structural transitions are putting pressure on some sectors, the Australian economy is in the enviable position of having solid growth, low unemployment, contained inflation, strong public finances and a record pipeline of business investment,'' said Swan, who is obviously on the lookout for upbeat surprises this profit season.

Clear-eyed

THE Hong Kong research firm that gained its fame for uncovering the financial fraud at the Toronto-listed Chinese forestry company Sino-Forest, in which the billionaire hedge fund investor John Paulson was badly burnt, has struck again.

A Muddy Waters Research report yesterday sparked a 35 per cent plunge in the share price of the New York Stock Exchange-listed Chinese education company New Oriental Education & Technology Group (ticker: EDU).

The report by the short-seller research firm headed by Carson Block said the group's ''financial statements for its Beijing operation are fraudulent because they show tax treatment that is impossible''.

New Oriental, which claims to be the largest provider of private education in China, according to Muddy Waters lied about its 700-odd-strong learning centre, bookstore and school network being company-owned.

The report claimed most of the centres were actually franchises. ''As is typical of many of the frauds we have witnessed in China, how EDU actually conducts its business differs materially from what it tells investors,'' said the report, which questioned the company's 292 per cent revenue growth since its listing.

The company saw its market capitalisation more than halve to $US1.5 billion in two trading sessions.

''The evidence of significant wrongdoing is so compelling and will likely lead EDU's auditor, Deloitte, to numerous other problematic discoveries,'' said the report.

But one company to survive Muddy Waters' scrutiny is the Macquarie-advised electronic billboard company Focus Media Holding.

While Sino-Forest collapsed earlier in the year, Muddy Waters has not done any research on Focus Media (which it claimed overstated its electronic billboard assets) since February when it said that more than 30,500 of Focus Media's ''displays are not LCD televisions at all - rather, they are mere cardboard posters''.

But of the 13 equity analysts covering Focus Media, 11 now have ''buy'' recommendations. One of the most bullish analysts on Focus Media is Macquarie's Hong Kong-based analyst Jiong Shao, who has a $43 target price, more than double its current share price.